Tax oversight of large corporations declined for a sixth straight year in 2015, new data show, a result of continuing budget shortfalls at the beleaguered IRS.
The amount of IRS employee time devoted to corporate tax investigations dipped 15 percent between 2014 and 2015, with the figure dropping 34 percent since 2010. From 2014 to 2015, the amount of additional taxes uncovered by the IRS after audits of big corporations took an even larger dive, plummeting 44 percent for corporations with more than $250 million in assets and plunging 55 percent for those with $20 billion or more in assets.
Compiled by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University, the new data were reported as the IRS enters a new tax season almost $2 billion short of its requested budget. “The significant reductions in the IRS budget will degrade the agency’s ability to continue to deliver on its mission during filing season and beyond,” IRS Commissioner John Koskinen warned in January. The agency’s budget has fallen $1.9 billion in the past five years.
Staffing reductions have left the IRS with the fewest employees it has had in 20 years, helping to push audit rates of large corporations to the lowest levels in a decade. “There is simply no way around the severity of the budget cuts without taking some difficult steps,” Koskinen said.
That has meant sharp cutbacks in enforcement, with about 1,800 positions slashed in that department over the course of 2015, resulting in an estimated $2 billion in lost tax revenue, Koskinen said.
The cutbacks have delivered a blow even where the agency has attempted to devote more resources amid shifting political priorities. For instance, as scrutiny has increased around the tax practices of American companies that undergo so-called inversions — meaning the firms’ headquarters move to lower-tax countries — the IRS has endeavored to devote increased attention to tax returns of foreign-owned entities.
But the TRAC data show the number of business audits of overseas companies has fallen nearly 60 percent between the first two months of last year and the same period this year.